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These 30 year terms and favorable terms like no prepayment penalty or balloon payments are a result of government regulations and subsidies that were created after the Great Depression in the 1930s and were designed to 1.) prevent people from losing homes when interest rates increase, 2.) encourage homeownership by making mortgages easier and more rational for buyers.

There are other government regulations and subsidies that encourages and compensates lenders for participating in this market. The government gives access to low interest loans through the federal reserve banking system, created private entities (such as Freddie Mae) that purchase conforming mortgage back securities and requires buyers to pay for loan default insurance until they have a specific amount of equity in the home (which compensates the lender in the event of a foreclosure).

These policies and subsidies are the only reason this market exists and is able to be so highly beneficial for buyers and allow for such a long-term risk taking.